The India VIX index, a measure of near-term volatility, has reached near six-month high, hinting at an increasingly bearish sentiment among investors.
The fear index hit a high of 17.45 - a level last seen on August 6, 2024 - after surging for four successive sessions and has risen by nearly 20 percent so far this year.
Market experts told Moneycontrol that India VIX was stuck in a sideways range between 12 and 17 since August, suggesting increasing nervousness among market participants when it comes to Nifty outlook over next 30 days.
"This nervousness could be originating from the uncertainty with respect to President Trump's tariff-related announcements,” said Akshay Chinchalkar, Head of Research, Axis Securities.
“Most market participants were expecting tariffs on Chinese exports to the US to be announced immediately, but the fact that didn't happen on day one of his presidency has made Chinese stocks gain the most in Asia today," Axis Securities analyst added.
"Mid and smallcap benchmarks have underperformed so far, which means that we have had a shift in sentiment from risk-on to risk-off during early hours of trading today," said Chinchalkar.
In terms of technicals, unless Nifty 50 climbs past 23,472, bears will continue to have the upper hand. The daily chart shows that the market has been trying to rebound via a Bearish Flag formation, which, if activated, could trigger a drop to 22,800 area in the near term, explained Chinchalkar.
The reason VIX is called the 'fear index' is because it is a measure of the expected volatility in the index over the next 30 days. It reflects market's expectation of how much an underlying asset will fluctuate based on the price of option contracts of the asset.
A low VIX reading generally indicates investor confidence and market stability, whereas a high VIX indicates that investors are worried of large price moves on the downside.
Chandan Taparia, Head of Derivatives & Technicals at Motilal Oswal Financial Services highlighted the 85 percent correlation between VIX and market movements. He highlighted two key points: first, the rising VIX indicates that market bounces are being sold, as VIX often acts as a contrarian indicator; second, increased volatility is likely in the markets.
While India VIX previously stabilised around 13-14, its rise to 17 signals heightened volatility and potential downside risks. This also suggests a new range of 100-250 points movement on Nifty 50, with higher VIX pointing to volatile swings and a negative market bias, Taparia added.
So far in 2025, the benchmark Sensex and Nifty 50 have declined 2.2 percent and 1.9 percent respectively, while broader market indices BSE Mid and Smallcaps have lost over 6.4 percent and 5.6 percent, respectively.
Looking ahead, VIX levels are expected to rise further toward the 18–21 range, suggesting that volatility and fear will continue to escalate. With the Union Budget approaching, apprehension in the market may have heightened, according to market experts. This lack of clarity contributes to volatility spike, as participants brace for potential surprises or disruptions.
Hardik Matalia, Derivative Analyst, Choice Broking said if the India VIX rises toward the 21 mark, we can expect the market to face extended selling pressure, with the Nifty 50 index potentially falling to the 22,800–22,500 range. Moreover, pessimism regarding Trump's policy measures, rise of Dollar index and subdued earnings have further dampened sentiment, increasing the likelihood of a downside.
Should the India VIX trend toward 21 level, the increasing uncertainty surrounding upcoming events will likely keep the Indian stock market on the edge. Participants should prepare for heightened price swings, and adjust their strategies to navigate this volatile phase, said Hardik Matalia.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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